Shares in Deutsche, Commerzbank rise on merger speculation

Markets welcomed the prospect of a merger between Deutsche Bank and Commerzbank on Monday with shares in both lenders trading higher following reports that Germany's largest banks are exploring the feasibility of a merger.

Shares in Deutsche, Commerzbank rise on merger speculation

The rumour mill in overdrive kick started the week for shares in Deutsche Bank and Commerzbank.

Up 2.2 and 4.3 percent respectively - on news that a merger between the two might be on the cards.

Germany's Welt am Sonntag newspaper was the first to report on the early stage talks and said Berlin politicians expect a decision in the coming weeks.

One German official told Reuters that Berlin is so worried about the health of Deutsche Bank that it's pushed for a merger with rival Commerzbank even though it could open up a huge financial shortfall.

(SOUNDBITE) (German) HEAD OF SPECIALIST FLOOR EQUITIES AT ODDO SEYDLER BANK, OLIVER ROTH, SAYING: "A possible merger of Deutsche Bank and Commerzbank would definitely lead to significant job cuts because the goal after all is to make savings.

Shareholders will only be happy temporarily because both institutions have problems and if you merge two institutions with problems, problems in the short term will not get smaller but probably bigger." The state owns a 15 percent stake of Commerzbank and would likely be a shareholder in the new group.

The German official said that any tie-up would likely result in a multi-billion-euro hole because a switch in bank ownership legally triggers a revaluation of assets such as government bonds.

A second German official said Deutsche's future was in question because high costs left it with little profit.

Both banks, the German finance ministry and the economy ministry have so far declined to comment.

Last month, as Deutsche Bank announced a return to profit in 2018, it insisted it's "on the right track" for growth and lower costs.